SIAEC – CIMB
Yield compression
SIE’s share price has outperformed the index by 12% YTD due to investors’ preference for high yield plays. However, with its less-than-spectacular FY3/13 results and dividend yield compression to 4.4%,we see limited upside to the share price.Maintain Neutral.
FY13 net profit is below expectations, at 94% of our forecast and 97% of consensus, because of a revenue shortfall. 4Q net profit accounted for only 23% of our FY13. SIE increased its dividend payout from 85% to 90% with a final DPS of 15 Scts (total DPS: 22 Scts). We cut our FY13-15 EPS by 8% for lower revenue but raise our target price, still based on blended P/E (19x from 15x) and DCF, in view of increased appetite for yield stocks.
Lower revenue, higher staff costs
4Q revenue fell 10% yoy but was stable qoq, taking FY13 revenue to S$1.15bn. FY13 revenue from repair and overhaul fell 5% yoy to S$725m due to lower volume of FMP and project revenue (cabin interior reconfiguration of aircraft). Revenue from line maintenance improved 5% yoy to S$421m, backed by a higher number of flights handled/day (+1% qoq, +5% yoy) in Changi Airport. EBITDA margin dipped 30bp to 14.3% due to higher staff cost, which accounted for 43% of operating costs (previously 40%). EBITDA margin would have been 11.6%, if not for the S$3.6m write-back of debt provisions and S$3.3m forex gain.
Weaker associates
Associates’ profit fell 30% yoy to S$63m while JV profit rose 22% yoy to S$96.2m. This could due to a weaker showing by Eagle Services (services P&W engines) compared to SAESL which services Rolls Royce engines.
Zero growth in earnings
Despite steady growth in flights handled in Changi airport in FY13 with no major capacity cuts among airlines, SIE achieved zero profit growth vs. its historical c.4% p.a. Management expects its performance to be stable in the near term but emphasised that the operating environment remains challenging due to uncertainties in the global economy.
SIAEC – CIMB
Yield compression
SIE’s share price has outperformed the index by 12% YTD due to investors’ preference for high yield plays. However, with its less-than-spectacular FY3/13 results and dividend yield compression to 4.4%,we see limited upside to the share price.Maintain Neutral.
FY13 net profit is below expectations, at 94% of our forecast and 97% of consensus, because of a revenue shortfall. 4Q net profit accounted for only 23% of our FY13. SIE increased its dividend payout from 85% to 90% with a final DPS of 15 Scts (total DPS: 22 Scts). We cut our FY13-15 EPS by 8% for lower revenue but raise our target price, still based on blended P/E (19x from 15x) and DCF, in view of increased appetite for yield stocks.
Lower revenue, higher staff costs
4Q revenue fell 10% yoy but was stable qoq, taking FY13 revenue to S$1.15bn. FY13 revenue from repair and overhaul fell 5% yoy to S$725m due to lower volume of FMP and project revenue (cabin interior reconfiguration of aircraft). Revenue from line maintenance improved 5% yoy to S$421m, backed by a higher number of flights handled/day (+1% qoq, +5% yoy) in Changi Airport. EBITDA margin dipped 30bp to 14.3% due to higher staff cost, which accounted for 43% of operating costs (previously 40%). EBITDA margin would have been 11.6%, if not for the S$3.6m write-back of debt provisions and S$3.3m forex gain.
Weaker associates
Associates’ profit fell 30% yoy to S$63m while JV profit rose 22% yoy to S$96.2m. This could due to a weaker showing by Eagle Services (services P&W engines) compared to SAESL which services Rolls Royce engines.
Zero growth in earnings
Despite steady growth in flights handled in Changi airport in FY13 with no major capacity cuts among airlines, SIE achieved zero profit growth vs. its historical c.4% p.a. Management expects its performance to be stable in the near term but emphasised that the operating environment remains challenging due to uncertainties in the global economy.
ComfortDelgro – CIMB
Defensive earnings
In contrast to its peer SMRT’s profit deterioration, ComfortDelGro turned in solid 1Q numbers characterised by mild revenue growth and stable margins. Management’s reaffirmation of its 50% dividend payout ratio was music to our ears in light of SMRT’s dividend cuts.
1Q13 net profit met expectations at 23% of our FY13 forecast and 22% of consensus. We keep our Neutral rating, EPS forecasts and target price (DCF, 7.3% WACC) unchanged. The stock lacks rerating catalysts, but is supported by a 3% dividend yield.
Lower energy costs offset cost inflation elsewhere
ComfortDelGro benefitted from lower energy costs in 1Q13, a trend which we expect to persist throughout the rest of the year. 1Q13 revenue inched up by 2% on broad-based growth. Lower energy costs (-13% yoy) helped to offset higher staff costs (+5.1%) and contract services expenses (+8.0%), supporting an 8% growth in net profit. The group has hedged 60-70% of its diesel needs and 70% of electricity needs for 2013 at unit costs below that of last year, providing some relief from escalating operating cost inflation.
DTL start-up costs weigh on rail margins
The group’s EBIT margin was stable at 11.0% in 1Q13 vs. 10.9% in 1Q12. The rail segment’s EBIT margin declined by 2.9%pts to 7.5% due to start-up costs incurred for the Downtown Line, but this was offset by stronger margins from diesel sales.
Dividends intact
In contrast to its peer SMRT’s dividend cuts, CD remains committed to its 50% payout policy. The group is free-cash flow positive and does not expect significant increases in capex this year. At 3.0%, CD’s dividend yield is superior to that of SMRT’s 1.7% yield.
ComfortDelgro – CIMB
Defensive earnings
In contrast to its peer SMRT’s profit deterioration, ComfortDelGro turned in solid 1Q numbers characterised by mild revenue growth and stable margins. Management’s reaffirmation of its 50% dividend payout ratio was music to our ears in light of SMRT’s dividend cuts.
1Q13 net profit met expectations at 23% of our FY13 forecast and 22% of consensus. We keep our Neutral rating, EPS forecasts and target price (DCF, 7.3% WACC) unchanged. The stock lacks rerating catalysts, but is supported by a 3% dividend yield.
Lower energy costs offset cost inflation elsewhere
ComfortDelGro benefitted from lower energy costs in 1Q13, a trend which we expect to persist throughout the rest of the year. 1Q13 revenue inched up by 2% on broad-based growth. Lower energy costs (-13% yoy) helped to offset higher staff costs (+5.1%) and contract services expenses (+8.0%), supporting an 8% growth in net profit. The group has hedged 60-70% of its diesel needs and 70% of electricity needs for 2013 at unit costs below that of last year, providing some relief from escalating operating cost inflation.
DTL start-up costs weigh on rail margins
The group’s EBIT margin was stable at 11.0% in 1Q13 vs. 10.9% in 1Q12. The rail segment’s EBIT margin declined by 2.9%pts to 7.5% due to start-up costs incurred for the Downtown Line, but this was offset by stronger margins from diesel sales.
Dividends intact
In contrast to its peer SMRT’s dividend cuts, CD remains committed to its 50% payout policy. The group is free-cash flow positive and does not expect significant increases in capex this year. At 3.0%, CD’s dividend yield is superior to that of SMRT’s 1.7% yield.
ComfortDelgro – Lim & Tan
- Comfort Delgro reported 1Q ’13 net profit of S$57.7 million, up 7.9% y-o-y, which was above market expectations.
- The Group’s taxi business contributed positively to its bottom-line especially in Singapore, due to higher rentals from replacement taxis, a larger operating fleet and an increase in cashless transactions.
- But its bus and rail business in Singapore saw growth in revenue being offset by higher wages.
- The weakness in Australian dollar, Sterling pound and Chinese Renminbi relative to the Singapore dollar also negated revenue performance from its overseas operations.
- Even as net capex for 1Q ’13 rose to S$101.4 million, versus S$86.9 million in the same period last year, its balance sheet remains healthy given its net cash position.
- Looking ahead, management guided for higher revenue contributions from its overall bus business (except for UK market), as well as increase in top-line for its Singapore rail and bus units. But they also citied that they could face rising cost pressures going forward.
- Overall, the transportation company posted a decent set of quarterly earnings results, despite the headwinds from escalating salary costs and translation (forex) loss from its overseas business amid a strong Singapore dollar.